Quarterly Check-in: 2026 Outlook

In our quarterly update, Sam outlined his approach to 2026, including his positions on gold, oil and valuation risk in the broader market.

Sam reviewed the performance of our three funds: the Veritas Canadian Equity Fund (a long-only strategy), the Veritas Absolute Return Fund (a long-short strategy), and the Veritas Next Edge Premium Yield Fund (targets an annualized distribution of 8% paid monthly using an actively managed covered options strategy). All three funds have demonstrated lower volatility than their respective benchmarks, which is a key differentiator for Veritas’ investment approach.

“We do tend to outperform in downmarkets. We haven’t had one of those in a while, but we are a little more active in trying to protect downside risk.”

00:00 Introduction and Positions‎

Sam details major winners, including gold stocks Hudbay Minerals Inc. (NYSE, TSX: HBM), Barrick Mining Corp. (NYSE: B, TSX: ABX), Agnico Eagle Mines Ltd. (NYSE, TSX: AEM), Newmont Corp. (NYSE: NEM) and Wheaton Precious Metals Corp. (NYSE, TSX: WPM).

Bombardier Inc. (TSX: BBD.b) has been a holding since its train division spinoff, benefiting from a business-jet pure-play, strong free cash flows, and debt reduction. Toronto Dominion Bank (NYSE, TSX: TD) was heavily acquired in November 2024 as a value play amid anti-money laundering issues. Royal Bank of Canada (NYSE, TSX: RY) represents one of Canada’s best banking franchises with superior wealth management. Rogers Communications Inc. (NYSE: RCI, TSX: RCI.b) was purchased when unloved, while it still had strong free cash flows and an undervalued media business. Fairfax Financial Holdings Ltd. (TSX: FFH) showed ROEs above trend while trading below historical valuations, though positions were trimmed as valuations reached fair value.

Sam explains that our short strategy focuses on building portfolios of stocks expected to underperform rather than seeking dramatic failures.

16:50 Market Valuation Risks

Sam presents historical data showing that after three-year periods with 50%+ S&P 500 gains, the probability of next 12-month gains drops to 55% versus a normal 75%, meaning there is a 45% probability of losses averaging 8.1%. The analysis shows a 30% chance of 0-10% market decline and a 15% chance of 10%+ correction. This creates a challenging environment where investors don’t want to miss potential 16%+ gains, but face doubled probability of losses compared to normal periods, suggesting the need for risk reduction and alternative strategies like the Absolute Return Fund.

19:20 Forward Return Scenarios and Earnings Models ‎

Sam presents two three-year scenarios for S&P 500 returns using trailing earnings models. The “Goldilocks” scenario assumes 12% annual earnings growth by September 2028, with the P/E ratio declining from 28 to 26 times, yielding 7.3% annual returns plus dividends (~ 9.7% total return). The weaker scenario shows 5% earnings growth, with a P/E contracting to 24 times, resulting in negative 2% annual returns plus dividends (essentially flat performance). Historical data shows that the S&P 500 has earnings growth of 5% or less about 45% of the time. “There is a high risk here of having a washout and no equity returns over the next three years.”

23:56 Multiple Expansion Analysis

Sam performed a regression analysis of P/E multiple changes since 1980, excluding the financial crisis period. He also examines the potential for multiple expansion with the Canadian railways, Canadian National Railway Co. (NYSE: CNI, TSX: CNR) and Canadian Pacific Kansas City Ltd. (NYSE, TSX: CP).

43:10 Sector Analysis

Sam analyzes TSX sector weights, looking for beatable earnings and multiple expansion.

52:50 Tracking the Gold Rally

Sam analyzes the current gold rally and shows it is at 468% of the 1970 gold-to-GDP ratio. “This is among the strongest, most powerful manias for gold that the market has ever experienced. We do have some questions about how much risk is involved in terms of potential correction.” At each peak, there is a crash that lasts about two years. “Now is a good time to be thinking about your exposures.” He analyzes demand sources and thinks that gold producer valuations remain reasonable.

1:00:14 Oil Supply-Demand Outlook ‎

Sam presents a bearish crude outlook, using IEA global supply-demand data to show the market shifting from balance (2022-2024) to oversupply through mid-2027.

1:03:07 Final Thoughts and Investment Strategy ‎

Sam concludes that elevated multiples and expectations create uphill battles requiring selective stock picking. “We do think that risk comes in cycles and we’re about to enter a risk cycle where the market starts worrying about a lot of the things it hasn’t been worrying about.”

DISCLOSURES

* S&P Global data, Veritas Asset Management Inc.
** Shiller.com Market Data Set, Veritas Asset Management Inc.
*** World Gold Council data, Bloomberg data, Veritas Asset Management Inc.
****Workplace data, Bloomberg data, Veritas Asset Management Inc.

Notes: Performance for all funds listed above are for Series/Class F units as of September 30, 2025. Inception, three-year and five-year returns are calculated on an annualized basis using historical daily returns on net asset value per unit, adjusted to reflect reinvested distributions. Correlation is calculated using daily returns between the funds and the index. Volatility is expressed in terms of historical annual volatility. Historical daily volatility is measured by the standard deviation of daily returns. Historical annual volatility is measured by annualized daily data.

The S&P/TSX Composite Total Return Index is a Canadian dollar denominated, capitalization-weighted index that includes the largest float-adjusted stocks trading on the Toronto Stock Exchange, subject to inclusion criteria. The index provides the broadest representation of market-weighted returns for large capitalization Canadian-listed stocks, including reinvested dividends, making it an appropriate index for diversified portfolios that invest primarily in Canadian stocks, such as the Veritas Absolute Return Fund and the Veritas Canadian Equity Fund. We may also refer to exchange traded funds (ETF) that closely track the S&P/TSX Composite total return, such as the iShares Core S&P/TSX Capped Composite ETF which carries a 0.99 or greater correlation to the index. While our funds are benchmarked against the S&P/TSX Composite, we may reference returns for the S&P 500 and NASDAQ Composite, as well as yields on U.S. ten-year Treasury bonds, which we view as relevant investment benchmarks for investors in North American equities. The S&P 500 represents approximately 80% of the total market capitalization of U.S. stocks, and remains the most broad-based indicator of large-cap U.S. equity returns. In contrast, the NASDAQ has a greater proportion of technology and growth stocks, which we view as providing additional insight into investors’ risk appetite. The ten-year U.S. Treasury rate is referenced as a measure of the lowest-risk investment alternative to equities (‘the risk-free rate’). Contact Veritas Asset Management Inc. for more information regarding comparative indices.

The information contained herein is for general information purposes and does not constitute a solicitation for the purchase or sale of securities. The full details of the Fund, its investment strategies and the risks are detailed in the Fund’s current simplified prospectus and fund facts document, copies of which may be obtained from Sedar, your dealer, Veritas Asset Management Inc. (“VAM”) or at Veritasfunds.com. Please read the prospectus before investing. Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments. All performance data assume reinvestment of all distributions or dividends and do not take into account other charges or income taxes payable by any unitholder that would have reduced returns. The performance of the Fund is not guaranteed, unit values change frequently and past performance may not be repeated. Performance is presented in Canadian dollars, unless otherwise stated, and is net of fees of Series F units of the Fund. VAM is an affiliate of Veritas Investment Research Corporation (“VIR”) by virtue of being under common control that may also from time to time have certain common directors, officers and/or employees. VIR produces and issues independent equity research regarding public issuers to investors and other capital markets participants. VAM is a client of VIR and receives research reports from VIR at the same time as VIR’s other clients. VIR and VAM have implemented policies and procedures to minimize the potential for and to address conflicts of interest, which are available upon request.

Cautionary Note Regarding Forward-Looking Statements

The information in this release may contain forward-looking statements. All statements, other than statements of historical fact, that address activities, events or developments that Veritas Asset Management Inc., the Portfolio Manager, or any affiliates thereof (the ‘Companies’) believe, expect, or anticipate will or may occur in the future (including, without limitation, statements regarding any targeted returns, projections, forecasts, statements, and future plans and objectives of the Companies) are forward-looking statements. These forward-looking statements reflect the current expectations, assumptions or beliefs of the Companies based on information currently available to the Companies. Forward-looking statements are subject to a number of risks and uncertainties that may cause the actual results of the Companies to differ materially from those discussed in the forward-looking statements, and even if such actual results are realized or substantially realized, there can be no assurance that they will have the expected consequences to, or effects on, the Companies.

For a list of factors that could cause actual results or events to differ materially from current expectations, please refer to our Prospectus and the section ‘Risk Factors’. Any forward-looking statement speaks only as of the date on which it is made and, except as may be required by applicable securities laws, the Companies disclaim any intent or obligation to update any forward-looking statement, whether as a result of new information, future events, or results or otherwise. Although the Companies believe that the assumptions inherent in the forward-looking statements are reasonable, forward-looking statements are not guarantees of future performance and accordingly undue reliance should not be put on such statements due to the inherent uncertainty therein.

Performance to September 30, 2025